Credit card theft is a major concern worldwide. Typically, a consumer is protected from theft as is the bank that issues a credit card. That is, when illegal use of a credit card is confirmed after an investigation by the bank, the consumer's account is credited for the amount of theft. However, the bank typically debits the account of a retailer that performed the illegal transaction.
To thwart illegal credit card use, banks have started to roll out dual chip-magnetic strip cards, such cards have been deployed in Europe for several years now and are in the processes of being fully deployed to United State (U.S.) based consumers.
The magnetic card readers that read chip-enabled cards are problematic to the U.S. consumer and U.S. retailer. Typically, legacy card readers that were supposed to be used for magnetic strip reading have been upgraded to read the embedded chip. The device or host device (Self-Service Terminal (SST)) interfaces were also upgraded to instruct consumers to leave the card in the card reader for the duration of the transaction (until canceled by the consumer, approved and completed, or denied by the bank).
The embedded chip on the card has to stay in the card reader for the entirety of the transaction because the reader includes a card-specific embedded key (which may be randomly updated during a transaction with a new key by the bank during the transaction). The key is used to encrypt the transaction on a unique transaction basis. This takes more processing time and therefore the card and its embedded chip have to remain in the card reader for the duration of a given transaction.
Unfortunately, this is problematic in the U.S. and for the U.S. consumer. The upgraded card readers do not physically lock the card in place during the transaction and the U.S. consumer is condition to insert and remove their cards quickly and often ignore the new interface warnings.
This is problematic for retailers for a variety of reasons. First, even for a failed transaction the banks charge the retailer a small transaction fee, which for a large retailer can add up to a significant amount of fees (especially given the frequency of failed transactions). Second, during high consumer traffic times, failed transactions delay transaction throughput at both cashier-assisted Point-Of-Sale (POS) terminals and at SSTs. So, the problem has fairly significant ramifications for retailers.